In what could put an end to a long saga, the US Securities and Exchange Commission announced today that it “obtained court approval of settlements with Telegram and its subsidiary TON Issuer Inc.”
“Without admitting or denying the allegations in the SEC’s complaint, the defendants consented to entry of a final judgment enjoining them from violating the registration provisions [contained in] the Securities Act of 1933,” the SEC stated.
“The judgment orders defendants to disgorge, on a joint and several basis, $1,224,000,000 in ill-gotten gains from the sale of Grams, with credit for the amounts Telegram pays back to initial purchasers of Grams, and also orders Telegram Group Inc. to pay a civil penalty of $18,500,000.”
Telegram is also required, for the next three years, to “give notice to the SEC staff before participating in the issuance of any digital assets.”
Telegram was charged for its unregistered offering of digital tokens called “Grams” in early 2018, which allowed Telegram to raise some $1.7 billion from investors – including US ones.
The US authorities have maintained the ICO violated the federal securities laws:
- On Oct. 11, 2019, the SEC filed a complaint against Telegram, alleging that the company had raised capital to finance its business by selling approximately 2.9 billion Grams to 171 initial purchasers worldwide. The SEC sought to preliminarily enjoin Telegram from delivering the Grams it sold, which the SEC alleged were securities that had been offered and sold in violation of the registration requirements of the federal securities laws.
- On March 24, 2020, the U.S. District Court for the Southern District of New York issued a preliminary injunction barring the delivery of Grams and finding that the SEC had shown a substantial likelihood of proving that Telegram’s sales were part of a larger scheme to unlawfully distribute the Grams to the secondary public market.
“New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws,” said Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit. “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.”
“Our emergency action protected retail investors from Telegram’s attempt to flood the markets with securities sold in an unregistered offering without providing full disclosures concerning their project,” said Lara Shalov Mehraban, Associate Regional Director of the New York Regional Office. “The remedies we obtained provide significant relief to investors and protect retail investors from future illegal offerings by Telegram.”
